Return on capital invested in agriculture

Walton2

Member
This might be a long thread! I reckon a very low ROI,ridiculously low,however that has a lot to do with the value of land.Lands value looks to be very high.....but that is surely down to supply and demand.....or is it? Simple question with a thousand answers.....
 

franklin

New Member
Says "excluding the value of the land".
I target a 20% return on my investment in growing the crop, if you see what I mean. That would be with a rent, mortgage, or rental equivalent to take into account the land.
 
Who buys a farm to get rich from farming it!?

Most buy as an investment due to tax and long term safety.

There a few who buy to spread their costs but I think most is investment or tax based these days?
 

franklin

New Member
I would call that a good return: I'm surprised it's achievable.

Ok, so consider:

With a rent and the cost of doing the work, a crop of wheat with decent BG program is about £500/ac to grow. If I grow 3.5t/ac at that, having replaced my P&K, then at todays prices I trouser that £500 and a little more. Add SFP and thats £100 profit on £500 invested, or 20%.

This *has* to happen, as that still means that to earn the same as a driver for Southern Trains (£70k) I need to farm 700ac of land and risk the weather ruining it all. It appears a Southern Trains driver can earn that while either striking or being late. So a 20% return sounds great, until you realise that on a rented farm of 250ac you are really just standing still while unionised / public sector employees are earning piles for working sub-40 hours a week whist getting sick pay, and being able tor retire at 65 on a big pension.

If you are on an AHA rent of £60 which includes a house and still growing a 3.5t/ac wheat crop then you could be making 30%+ return on tenants capital.
 

Pasty

Member
Location
Devon
Ok, so consider:

With a rent and the cost of doing the work, a crop of wheat with decent BG program is about £500/ac to grow. If I grow 3.5t/ac at that, having replaced my P&K, then at todays prices I trouser that £500 and a little more. Add SFP and thats £100 profit on £500 invested, or 20%.

This *has* to happen, as that still means that to earn the same as a driver for Southern Trains (£70k) I need to farm 700ac of land and risk the weather ruining it all. It appears a Southern Trains driver can earn that while either striking or being late. So a 20% return sounds great, until you realise that on a rented farm of 250ac you are really just standing still while unionised / public sector employees are earning piles for working sub-40 hours a week whist getting sick pay, and being able tor retire at 65 on a big pension.

If you are on an AHA rent of £60 which includes a house and still growing a 3.5t/ac wheat crop then you could be making 30%+ return on tenants capital.
But you would get the SFP if you left it in grass and sold it off field, doing absolutely nothing. So you surely can't count that as part of the return. Why bother growing the wheat? If you left it in grass and sold it for £70ac with the buyer paying for fert if they require it, you have made £170ac for zero outlay and no work. Zero depreciation or risk on machines etc.
 

franklin

New Member
But you would get the SFP if you left it in grass and sold it off field, doing absolutely nothing. So you surely can't count that as part of the return. Why bother growing the wheat? If you left it in grass and sold it for £70ac with the buyer paying for fert if they require it, you have made £170ac for zero outlay and no work. Zero depreciation or risk on machines etc.

No, because a return on a tenants capital is post-rent. And my tenancy wouldnt let me do that. I was merely giving a worked example of how you can produce a 20% return on working capital as a tenant farmer and showing how, despite it looking good on paper, it may not be so snazzy. Compare to the "return" on the capital of a self-employed bricklayer.

But yes, possible to have a rented farm wholly in HLS and make a similar if higher return per acre for lower outlay. Some might consider that excellent farm business skills. Infact, if I could sign up to a 10-year scheme for my farm which payed the rent and left a bit of grazing and my house paid for, I might very well jump at that; have a nice time doing the school run; part-time job at Waterstones; keep a few hobby animals. Makes large-scale arable farming look a bit daft doesnt it!
 
roi has to be calculated after including a proper cost for the farmer and all unpaid staff and averaged over a number of years to take out exceptional years good 2008 1996 or bad 2001 2012 2013

after paying rent and finance 5 to 10 % is achievable on net working capital some years 18% some minus 2
depreciation calculated on an purchase less resale divided by no of years used
all cost not associated with farming excluded ie housing, cars, shooting ect
 

SFI - What % were you taking out of production?

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Red Tractor drops launch of green farming scheme amid anger from farmers

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As reported in Independent


quote: “Red Tractor has confirmed it is dropping plans to launch its green farming assurance standard in April“

read the TFF thread here: https://thefarmingforum.co.uk/index.php?threads/gfc-was-to-go-ahead-now-not-going-ahead.405234/
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